Rat race for platform economy

Many companies, whether they realise it or not, have already taken steps to embed themselves into the digital ecosystems that will drive their growth in future. However, the pace of adopting new digital platforms for doing business needs to increase, especially in Africa. These platforms are business models that create value by facilitating exchanges between two or more interdependent groups, usually consumers and producers.

PLATFORM companies according to the Wall Street Journal, are major drivers of innovation as the top companies set the standards for the digital transformation taking place around the world. Traditional companies are challenged to keep up or risk being left behind. As platforms become the new fad for how business is done, African companies must seize this opportunity to begin to build a new digital value chain.

According to the Chief Executive of Accenture South Africa and Chairman of Accenture Africa, William Mzimba, more than a quarter (27 per cent) of the executives Accenture recently surveyed reported that digital ecosystems are transforming the way their organisations deliver value.

He said: “And we found that 81 per cent of executives say platform-based business models will be core to their growth strategy within three years. The mandate for leaders is to capitalise on new relationships, building a network of digital partners that will not only enhance their existing business, but also allow them to forge their way into newly emerging digital ecosystems.

“What we are seeing is that entire ecosystems of customers are aggregating around several new digital platforms, and businesses are more motivated than ever before to take advantage of these entry points. Communication platforms such as WeChat and WhatsApp, and Artificial Intelligence (AI) intermediaries such as the Google Assistant, Alexa, and Siri, represent distinct ecosystems delivering unprecedented access to customers – and businesses are flocking to them.

“A couple of examples include Hyatt Hotels, which uses Facebook Messenger to let guests do everything from booking and checking existing reservations to ordering room service during a stay, while Capital One bank developed a ‘skill’ for Amazon Echo’s Alexa, allowing people to check their accounts and pay credit card bills via the Echo device.”

He said little surprise that the trend two of Accenture’s Tech Vision 2017 study highlights that in the state of the Cloud survey 95 per cent of respondents reported, using public, private, or hybrid cloud technology, while the Chief Information Officer (CIO) Strategic Partner Index run by the IDC reported that 29 per cent of information technology (IT) leaders are spending more than half their IT budget on external providers. Each platform commitment means easier future engagement with other companies on the platform, using the same infrastructure.

However, of the 176 platform companies included in a recent report: The Rise of the Platform Enterprise: A Global Survey, led by Peter Evans and Annabelle Gawer, and sponsored by the Centre for Global Enterprise, Asia has the largest number with 82, 64 of which are in China. North America has 64, with 63 in the United States (US). Europe is a major consumer of platform services, but it’s home to relatively few platform companies , with 27 spread across 10 countries, nine of which are in the United Kingdom (UK). It is disturbing that Africa and Latin America have a number of small platform companies, only three of which have met the $1 billion valuation threshold for inclusion in the survey.

More African companies need to decide which ecosystems to join and which roles to play as the technology changes are only the beginning.

Closing the gaps

He said an important way to get moving on this journey is to conduct an audit identifying how many internal and external platforms one is using and the goals for their use. Identify and address unnecessary overlaps. “Determine the platforms your organisation most relies on, as well as those that most depend on you. These are the ecosystems where your organisation should hold its strategic and market strengths,”he said..

He continued:”Over the next 100 days, look to essentially develop a comprehensive strategy to establish the foundation for your platform business model and ecosystem. During this phase you should appoint a C-suite sponsor to oversee a team that is responsible for championing your new ecosystem and digital partnership strategies. Then over the next year, leadership should have achieved comprehensive understanding of the new rules of business, developed a platform business model strategy, and started to test it with the launch of a small pilot programme.

“Companies should keep expanding the conversation. For instance, in the first 100 days, have a strategy summit with your closest partners to understand their goals for the future; uncover shared goals and commit to developing a strategic plan for achieving them together.

“Consider your organisation’s future through the lens of the biggest disruptions shaping your market from inside and outside your industry. Craft the ideal role of your company in this future, and develop a shortlist of partners, who can help make it a reality. And remember to develop metrics to quantify the results of ecosystem participation.”

“Many global brands are already taking the bold steps needed. The digital ecosystem is, for instance, totally redefining what automakers do, rather than just building cars, are engaging customers throughout the vehicle lifecycle, directly managing software upgrades, diagnostics, and safety. In the insurance industry, pulling down driving data from connected car platforms has enabled new services such as pay-per-mile insurance with newcomers like Google and Metromile to challenge the industry status quo. The opportunities are endless, no matter what industry you are in,” Mzimba said.

According to him, General Motors (GM) kicked off in 2016 with a $500 million investment into ride-share platform Lyft. The move gave the GM inroads to launch its Express Drive service, an exclusive offering for successful, but car-less, Lyft driver applicants to rent a car directly from the GM and get to work right away. The programme was remarkably successful in the short term, opening a new line of business for GM: by July, 30 per cent of new Lyft drivers were requesting an Express Drive vehicle in their sign-up.

In addition to partnering Lyft, GM also made a $1 billion-plus acquisition of the autonomous vehicle software company Cruise Automation, and another billion-dollar investment in building an autonomous vehicle testing facility in Detroit.

This has shown how platforms are rapidly becoming the central hubs for the rich and complex digital ecosystems that companies want to access. Consider the fact that 70 per cent of ‘unicorn’ startups (over $1 billion!) are platform companies. Other companies such as personal car-rental app Turo and group dining experience have introduced their own offerings, as have dozens of start-ups, each with their own angle and offering. LiquidSpace, which lists offerings in more than 500 cities across the U.S, Australia and Canada, offers a platform for renting workspaces and meeting rooms by the day or hour.

In South Africa, a good example of a company embracing the platform economy and reaping rewards is Discovery Vitality, while Discovery’s proposed bank is another example of the evolution of this concept into other exciting sectors. The retail market for consumer goods in South Africa received a shot in the arm in 2015 when Kalahari was merged with Takealot, with the technology platform cleverly harnessed to drive growth since then.

Remember the sharing economy brings people together through technology to exchange or rent access to goods and services. So, entrepreneurs are building this economy by leveraging emerging digital technologies to meet customers’ needs in new and disruptive ways.

Digital and mobile technologies have combined with public support to create a host of opportunities to transform the way government manages the infrastructure it has already acquired. For instance, through MuniRent, six local governments in Michigan are already renting equipment to and from each other.

How African companies and governments react to this change brought about the platform economy will define their prospects going forward. The platforms they use will serve as the pathways to the new digital economies that will drive growth and jobs across the continent. They will form the pillars of entire value chains in the future and so African companies need to ensure that they make these decisions wisely – and fast because there is no doubt that the digital partnerships African companies make today will determine how successful they will be tomorrow.